Question

Fancy Cat Products has a project that will cost $241,000 today and will generate monthly cash flows of $5,730 for the next 55 months.


What is the rate of return of this project when expressed as an APR?


a. 12.47%


b. 10.41%


c. 12.10%


d. 13.83%


e. 11.17%

Answer 1

Answer:

Option C is correct one.

The rate of return of this project when expressed as an APR is 12.10%

Explanation:

Here initial cost of project pv = -$241,000

monthly payment pmt = $5,730

time nper = 55 months

Monthly rate of return RATE = RATE(nper,pmt,pv)

= RATE(55,5730,-241000)

= 1.01%

 

APR = 12* monthly rate of return = 12*1.01% = 12.10%